US FINANCIAL MARKET
Stocks Fall in Fresh Selloff on Wall Street – Wall Street Journal, 10/6/2021
- U.S. stocks fell Wednesday, dragged lower by broad losses across everything from shares in airlines to technology stocks.
- The S&P 500 dropped about 1.2% at the open.
- The tech-focused Nasdaq Composite Index also fell 1.2%, while the Dow Jones Industrial Average lost 450 points, or about 1.3%.
- Stock trading has been bumpy lately as investors have grappled with soaring energy prices and a general shift higher in government bond yields.
- Contracts for West Texas Intermediate, the main grade of U.S. crude, fell 1.7% to $77.59 a barrel, backing further away from the $80 a barrel mark. WTI prices haven’t surpassed $80 a barrel on an intraday basis since November 2014.
- Shares of American Airlines lost 4.4% and Delta Air Lines fell 4.7% after Goldman Sachs analysts downgraded their rating for both stocks, citing concerns about fuel costs and a slowdown in economic growth.
- Palantir Technologies jumped 5.6% after saying it won a data and analytics contract with the U.S. Army.
- The yield on the 10-year U.S. Treasury note was last at 1.522%, compared with 1.528% Tuesday. Yields fall as bond prices rise.
- Swings in energy prices rippled through European government-bond markets. The yield on 10-year U.K. gilts rose as high as 1.152% from 1.093% on Tuesday, before pulling back.
- The U.K. is exposed to the global gas shortfall because it has minimal amounts of the fuel in storage.
- Overseas, markets retreated. The Stoxx Europe 600 slid 1%, led lower by shares of travel, leisure and retail companies. Aircraft maker Airbus and Jeep-owner Stellantis fell more than 2% apiece.
- Hong Kong’s Hang Seng fell 0.6%.
Sweden, Denmark Halt Moderna’s Covid Shot for Younger People – Bloomberg, 10/6/2021
- Sweden and Denmark decided to pause vaccinations with Moderna’s Covid-19 shot for younger people because of potential side effects.
- The Swedish health authority Wednesday cited new data on the increased risk of heart inflammation as a reason for the pause for those aged 30 and under. Denmark will stop giving the shot to those younger than 18.
- Sweden’s public health watchdog said a new preliminary analysis from the Nordic region indicates that the connection between vaccination and heart inflammation is clearest with the Moderna shot, especially after the second dose.
- The higher risk comes within four weeks of vaccination, and usually in the first two weeks, it said.
- Those who have been vaccinated recently with a first or second dose of the Moderna vaccine shouldn’t worry, Tegnell said, as the risk is very small.
- Denmark’s National Board of Health indicated it hasn’t seen any differences in side effects between the two vaccines.
Oil Extends Declines After Bigger-Than-Expected U.S. Supply Rise – Bloomberg, 10/6/2021
- Oil extended losses after a U.S. government report showed crude stockpiles rose by more than expected and after Russia signaled it would help ease a growing natural gas crisis.
- Futures in New York fell as much as 2% on Wednesday. U.S. crude inventories increased 2.35 million barrels last week, according to an Energy Information Administration report.
- The industry-funded American Petroleum Institute on Tuesday had reported a 951,000 barrel-gain in supplies.
- Earlier, Russian President Vladimir Putin said the country is ready to increase winter gas flows to Europe, easing global supply concerns, and sending natural gas and crude futures lower.
- A stronger dollar is also making commodities priced in the currency less attractive.
Palantir stock rallies on $823 million Army contract – MarketWatch, 10/6/2021
- The company said it won a $823 million contract to provide the Army with its Gotham platform, which is “an operating system for defense decision making and is specifically designed to connect the dots between disparate sources”.
- Palantir said the platform will “support Army Intelligence users worldwide with a globally federated Intelligence data fabric and analytics platform spanning multiple security classifications.”
- The contract falls under the Army’s Capability Drop 2 program. Palantir said the CD-2 contract is “one of several” projects it is working on to modernize Army intelligence.
Amazon’s Twitch Is Hacked, Exposing Source Code, Creator Payouts – Bloomberg, 10/6/2021
- Amazon.com’s video game streaming platform Twitch has been attacked by an anonymous hacker, who claims to have exposed sensitive source code and detail on payouts to content creators, according to multiple media reports.
- The leak also exposed Amazon’s plans to launch a digital gaming distribution platform, a potential challenger to Valve’s dominant Steam storefront. Bloomberg has reported previously on Amazon’s plans for a digital game store.
- The hacker said the purpose of the leak was to “foster more disruption and competition in the online video streaming space,” which he described as a “disgusting toxic cesspool,” according to industry website Video Games Chronicle.
- The leaked data allegedly details how much the platform’s top streamers have earned via payouts from August 2019 to September 2021, with some channels raking in as much as $9.6 million during the period, according to Gamesindustry.biz.
Boeing to Unveil Air Freighter, Setting Up a Rumble With Airbus – Bloomberg, 10/6/2021
- Boeing is poised to introduce an air-freight version of its 777X jetliner within the next few weeks and is in advanced talks with Qatar Airways and other potential buyers, people briefed on the matter said.
- The unveiling of Boeing’s first new jet in four years will intensify a fight with Airbus SE for supremacy in an aviation segment that’s flourishing as sales of passenger jets limp through the Covid-19 pandemic.
- The European planemaker is marketing a freighter based on its A350-1000 jet, attempting to break Boeing’s decades of dominance in a lucrative business.
- In addition to Qatar, Boeing is also courting FedEx, Deutsche Lufthansa, Singapore Airlines and Deutsche Post’s DHL unit, according to the people, who asked not to be identified as the talks are confidential.
- While Boeing’s discussions over the new freighter have been known, the details of the official launch, likely at the Dubai Airshow next month, haven’t been reported before.
Shale Restraint Means ‘Modest’ Oil Growth in 2022, BNEF Says – Bloomberg, 10/6/2021
- U.S. shale oil production will expand at a “modest rate” over the next 18 months even as prices touch multiyear highs, according to BloombergNEF, leaving OPEC in a powerful position as the world cries out for more barrels.
- Producers are using cash flow to pay down debt and reward shareholders rather than invest in new drilling, BNEF said in a report published Wednesday. Yet demand for energy is rising around the world. U.S. crude futures reached a seven-year high this week after OPEC and its allies declined to alter their supply agreement to raise output.
- U.S. production will reach 12.1 million barrels by the end of next year, up 440,000 barrels a day from the end of 2021, according to BNEF’s base case scenario. That’s lower than its pre-pandemic record high of 13 million from 2019.
- Under a bull scenario, in which prices average $80 a barrel from now until the end of 2022, BNEF sees production rising to 12.4 million barrels a day.
- The sole driver of next year’s growth will be the Permian Basin of West Texas and New Mexico, with all other regions flatlining or declining.
Bank of America raises U.S. minimum hourly wage to $21 – Reuters, 10/6/2021
- Bank of America said on Wednesday it had raised its U.S. minimum hourly wage to $21, as it works to keep its promise of increasing the pay to $25 an hour by 2025.
- The $25 figure is higher than at competitors, and the second-largest U.S. bank has also asked its vendors to set a minimum wage of $15 an hour.
- In the last four years, Bank of America raised the minimum hourly wage to $20 from $15.
- Walmart, Starbucks, Amazon.com and CVS Health have raised or are planning to hike wages.
Facebook Whistleblower’s Testimony Builds Momentum for Tougher Tech Laws – Wall Street Journal, 10/6/2021
- Facebook whistleblower Frances Haugen testified to Congress Tuesday on internal documents showing harms from the company’s products—from teenagers’ mental-health problems to poisoned political debate—adding fuel to efforts to pass tougher regulations on Big Tech.
- The documents gathered by Ms. Haugen, which provided the foundation for The Wall Street Journal’s Facebook Files series, show how the company’s moderation rules favor elites; how its algorithms foster discord; and how drug cartels and human traffickers use its services openly.
- Ms. Haugen singled out Facebook founder Mark Zuckerberg for criticism, citing his control over the company. Mr. Zuckerberg controls about 58% of Facebook’s voting shares, according to an April regulatory filing.
- Republican and Democratic lawmakers at the hearing renewed their calls for regulation, such as strengthening privacy and competition laws and special online protections for children, as well as toughening of the platforms’ accountability.
Coal Shortages Push Up Prices, Weigh on Economies – Wall Street Journal, 10/6/2021
- Coal supply shortages are pushing prices for the fuel to record highs and laying bare the challenges to weaning the global economy off one of its most important—and polluting—energy sources.
- The crunch has many causes—from the post-pandemic boom to supply chain strains and ambitious targets for reducing carbon emissions. And it is expected to last at least through the winter, raising fears in many countries of fuel shortfalls in the months ahead.
- In China, strained coal supplies and surging costs have resulted in electricity shortfalls on a scale unseen in more than a decade, hitting industry and prompting some cities to turn off traffic lights to conserve power.
- Other major coal importers in Asia, including Japan and South Korea, are jostling to secure supplies. While in Europe, rising prices for coal and other energy resources have hit factory output and household bills.
- Production last year fell by about 5% from 2019. And ramping up production takes time, coal-producers say. They say it can take nine months to get new mining trucks and even longer to install new equipment at mines.
US ECONOMY & POLITICS
U.S. Companies Add Most Jobs in Three Months, ADP Data Show – Bloomberg, 10/6/2021
- U.S. companies added more jobs than forecast in September, the most since June, suggesting that ongoing hiring challenges are beginning to ease as more Americans return to the workforce.
- Businesses’ payrolls increased by 568,000 last month, led by leisure and hospitality, after a revised 340,000 gain in August, according to ADP Research Institute data released Wednesday. The median forecast in a Bloomberg survey of economists called for a 430,000 rise.
- Service-provider employment increased 466,000 in September, led by payrolls at leisure and hospitality businesses, which rose by 266,000 during the month.
- Payrolls at goods producers climbed by 102,000, mostly driven by gains at construction and manufacturing firms, both the most in a year.
- Companies with more than 1,000 workers added 354,000 people to payrolls, while small businesses posted a gain of 63,000.
Democrats Float Changes to Filibuster Amid Debt Ceiling Standoff – Wall Street Journal, 10/6/2021
- Top Senate Democrats and Republicans blamed each other for the failure of Congress to raise the nation’s debt ceiling, with some Democrats floating possible changes to the Senate’s filibuster rule to resolve the impasse, ahead of a possible default in as little as two weeks.
- Senate Minority Leader Mitch McConnell (R., Ky.) repeated that Democrats shouldn’t expect any GOP help, arguing they should use a procedure called budget reconciliation to pass the debt-limit increase with just a simple majority.
- Sen. Chris Murphy (D., Conn.) and other Democrats said they were discussing a possible one-day elimination of the 60-vote filibuster in order to raise the debt ceiling, or potentially a permanent carve-out that would make it against the Senate rules to filibuster debt ceiling increases.
- Such a change would require the support of all 50 Democrats, and Sens. Joe Manchin (D., W.Va.) and Kyrsten Sinema (D., Ariz.) have been adamant that they want to preserve the filibuster.
- Republicans view creating exceptions to the filibuster as the start of a process that would end with the rule’s elimination as lawmakers lobby for additional legislation—such as on immigration or voting—to also be exempt.
- Asked Tuesday whether he would be open to making some temporary changes to the filibuster to deal with the debt ceiling, Mr. Manchin responded, “I just know that there’s enough people here that will not let this country fall to default. So I want all of your readers at The Wall Street Journal to know: It is not going to happen.”
Democrats Wrangle Over How to Shrink $3.5 Trillion Proposal – Wall Street Journal, 10/6/2021
- Democrats wrestled Tuesday with how to squeeze their wish list of programs and tax changes into a social policy and climate package whose size and scope centrists in the party are willing to support.
- Mr. Biden said Tuesday he was hopeful Mr. Manchin would be willing to spend more than the $1.5 trillion he had earlier proposed. “Sure sounds like he’s movin’. I hope that’s the case,” Mr. Biden said.
- “I’m not ruling anything out, but the bottom line is I want to make sure that we’re strategic and we do the right job,” Mr. Manchin told CNN.
- A central question Democrats must now contend with is whether to try to squeeze in funding for a broader array of programs by shortening their duration, or spending on fewer programs for a longer period.
- Senate Majority Leader Chuck Schumer (D., N.Y.) said this week he hoped to pin down an agreement within coming days to pass the full package by the end of the month, though some lawmakers and aides say the process could take longer.
Student-Loan Forgiveness to Include More Public-Sector Workers – Wall Street Journal, 10/6/2021
- The Biden administration is expected to overhaul a student-loan forgiveness program that would make it easier for more public-sector workers to qualify for debt relief.
- The planned changes to the Public Service Loan Forgiveness program will help roughly 550,000 borrowers of the 1.3 million enrolled in the program get closer to loan forgiveness, the Education Department said.
- To qualify for loan forgiveness, a borrower must work in a public-sector job and have made 120 on-time payments toward repaying the debt. But the program is only available to borrowers who have a specific type of student loan, known as Direct Loans, from the federal government.
- The changes set to be announced Wednesday will temporarily allow all payments regardless of loan type to count toward the PSLF program, if borrowers consolidate their student debt by Oct. 31, 2022. Borrowers with formerly ineligible loans will also have their payments counted, if they apply for the program by that date, the Education Department said.
EUROPE & WORLD
German industrial orders fall more than expected in August – Reuters, 10/6/2021
- German industrial orders fell more than expected in August on weaker demand from abroad following two months of unusually strong gains due to major contracts, data showed on Wednesday.
- The figures published by the Federal Statistics Office showed orders for goods ‘Made in Germany’ were down by 7.7% on the month in seasonally adjusted terms. A Reuters poll of analysts had pointed to a drop of 2.1% on the month.
- The steep drop on the month was partly caused by previous orders for planes, ships and other large vehicles which had pushed up orders by 4.9% in July and 4.6% in June, the office said.
- Without this distorting effect, industrial orders were down by 5.1% in August.
- Nonetheless, overall industrial orders remained at a historically high level and were already 8.5% above their pre-crisis levels of February 2020, the month before Germany was hit by the COVID-19 pandemic, the ministry said.
U.K. Inflation Expectations at 13-Year High Lift Rate-Hike Bets – Bloomberg, 10/6/2021
- A market-based measure of expected inflation in the U.K. over the next decade topped 4%, bolstering wagers for tighter monetary policy.
- The so-called 10-year breakeven rate climbed as much as 10 basis points to 4.08%, the highest since 2008. The move was spurred by a spike in energy costs with U.K. natural gas prices surging to a record, threatening to fuel higher consumer prices.
- In response, money market have almost fully priced a rate hike from the Bank of England as soon as December, in what would be its first increase in over three years.
- The Times newspaper also reported Prime Minister Boris Johnson will announce a rise in the minimum wage to about 9.42 pounds ($12.78) per hour within weeks, further muddying the outlook.
New Zealand Raises Interest Rates as Inflation, Housing Pressures Build – Wall Street Journal, 10/6/2021
- The Reserve Bank of New Zealand lifted its benchmark rate to 0.5% from a record-low 0.25% and signaled more increases over the next year, as it seeks to tame inflation stoked by higher oil prices, rising transport costs and supply-chain disruptions. It said the increase would also drive up mortgage rates and so help cool house prices, up about 30% over the past year.
- New Zealand offers a preview of the challenges that countries may face as they emerge from the pandemic. Rising household debt and inflation have become a bigger threat to some economies than any resurgence of Covid-19 driven by the Delta variant.
- South Korea and Norway have already tightened monetary policy, while interest rates in more-volatile emerging economies from Brazil to Turkey have also gone up.
China Leaps Ahead in Effort to Rein In Algorithms – Wall Street Journal, 10/6/2021
- A sweeping new plan to restrain the algorithms that power tech platforms has thrust China to the forefront of a growing movement to curb the influence of giant internet companies.
- Launched last week by the Cyberspace Administration of China, the campaign aims to establish a comprehensive system to regulate the use of algorithms within three years, part of the ruling Communist Party’s effort to rein in what it sees as unscrupulous business practices and exert more control over online discourse.
- The campaign puts China a step ahead in policing tech platforms, as governments around the world grapple with how to respond to automated technologies that are rewiring business, social interactions and politics.
- Under the three-year plan released last week, Chinese regulators outlined steps to monitor algorithms, including a registration process and the establishment of a technical team to evaluate an algorithm’s mechanisms and risks.
TeamViewer Warning a Wake-Up Call for Europe’s Lockdown Darlings – Bloomberg, 10/6/2021
- European pandemic winners from online fashion retailers to companies supporting remote-working are suffering lockdown withdrawal symptoms.
- TeamViewer’s outlook cut on Wednesday was followed by a whopping 28% plunge that dragged the German software maker’s shares to a record low.
- It’s among growing signs that the good times for companies that benefited from people stuck at home during the pandemic are ending.
- With Europe’s third-quarter earnings season just around the corner, investors will keep a close eye on online food delivery firm Just Eat Takeaway.com’s trading update and retailer Asos’s full-year results, both due next week.
- Analysts are also sounding the alarm. Logitech International fell as much as 8.3% last week after Morgan Stanley downgraded the Swiss maker of headsets, wireless mice and webcams to underweight, citing expectations for demand to fade and earnings estimates to decline.
Tesco defies supply chain challenges to lift profit outlook – Reuters, 10/6/2021
- Tesco, Britain’s biggest retailer, raised its full-year earnings forecast on Wednesday after the unmatched scale of its store and online operations helped it outperform rivals in the first half and beat expectations with a 16.6% jump in profit.
- Group sales rose 3% to 27.3 billion pounds, while UK like-for-like sales climbed 1.2%, having risen 0.5% in the first quarter.
- The company, with a 27% share of Britain’s grocery market, made an adjusted retail operating profit of 1.39 billion pounds in the first half versus 1.19 billion a year earlier.
- Despite inflationary pressures, Tesco said its customers saw prices fall in the first half and they were still falling in the second half.
- Tesco forecast a full-year adjusted retail operating profit of 2.5-2.6 6 billion pounds, having previously forecast a similar outcome to 2019-20, when it made 2.3 billion pounds.
- Japanese-American broadcaster, Iva Toguri D’Aquino (Tokyo Rose), was sentenced to 10 years in prison and fined $10,000 for treason. (1949)
- The Yom Kippur War began when Syria and Egypt attacked Israel. (1973)
- President Jimmy Carter received Pope John Paul II, the first pope to visit the White House. (1979)
- Egypt’s President Anwar Sadat was assassinated in Cairo. (1981)